Construction Defect Litigation From A to Z National Business Institute

1. Construction Defect Litigation From A to ZNational Business Institute Indemnity Provisions: Is the Subcontractor Responsible? What about the Design Professional? October 4, 2012 Wm. David Byassee, Esquire William T. Slamkowski, Esquire 1099 18th St., Suite 2150, Denver, CO 80202 Phone: (303) 390-0003 • Fax: (303) 390-0177 dbyassee@jacksonkelly.com • wslamkowski@jacksonkelly.com • www.jacksonkelly.com

2. The Difference Between “Defend,” “Hold Harmless” and “Indemnity”

3. Hold harmless: “absolve (another party) from any responsibility for damage or other liability arising from the transaction; indemnify.” • Duty to defend: “the obligation of an insurer to provide an insured with a legal defense against claims of liability, within the terms of the policy.” • Indemnify: “to reimburse (another) for a loss suffered because of a third party’s or one’s own act or default; hold harmless. 2. To promise to reimburse (another) for such a loss. 3. To give (another) security against such a loss.” Black’s Law Dictionary (9th ed. 2009).

4. Colorado Law on Indemnity

5. C.R.S. 13-21-111.5(6)(b) (b) Except as otherwise provided in paragraphs (c) and (d) of this subsection (6), any provision in a construction agreement that requires a person to indemnify, insure, or defend in litigation another person against liability for damage arising out of death or bodily injury to persons or damage to property caused by the negligence or fault of the indemnitee or any third party under the control or supervision of the indemnitee is void as against public policy and unenforceable.

6. (c) The provisions of this subsection(6) shall not affect any provision in a construction agreement that requires a person to indemnify and insure another person against liability for damage, including but not limited to the reimbursement of attorney fees and costs, if provided for by contract or statute, arising out of death or bodily injury to persons or damage to property, but not for any amounts that are greater than that represented by the degree or percentage of negligence or fault attributable to the indemnitor or the indemnitor’s agents, representatives, subcontractors, or suppliers.

7. (d) (I) This subsection (6) does not apply to contract clauses that require the indemnitor to purchase, maintain, and carry insurance covering the acts or omissions of the indemnitor, nor shall it apply to contract provisions that require the indemnitor to name the indemnitee as an additional insured on the indemnitor’s policy of insurance, but only to the extent that such additional insured coverage provides coverage to the indemnitee for liability due to the acts or omissions of the indemnitor. Any provision in a construction agreement that requires the purchase of additional insured coverage for damage arising out of death or bodily injury to persons or damage to property from any acts or omissions that are not caused by the negligence or fault of the party providing such additional insured coverage is void as against public policy.

8. Common Law IndemnityJoint and Several Liability

9. Key Contract and Subcontract Provisions, Including AIA and Consensus DOCS

10. AIA – A201 – 2007 (General Conditions)

11. ¶ 3.18 Indemnification 3.18.1 To the fullest extent permitted by law the Contractor shall indemnify and hold harmless the Owner, Architect, Architect’s consultants, and agents and employees of any of them from and against claims, damages, losses and expenses, including but not limited to attorneys’ fees, arising out of or resulting from performance of the Work, provided that such claim, damage, loss or expense is attributable to bodily injury, sickness, disease or death, or to injury to or destruction of tangible property (other than the Work itself), but only to the extent caused by the negligent acts or omissions of the Contractor, a Subcontractor, anyone directly or indirectly employed by them or anyone for whose acts they may be liable, regardless of whether or not such claim, damage, loss or expense is caused in part by a party indemnified hereunder. Such obligations shall not be construed to negate, abridge, or reduce other rights or obligations of indemnity that would otherwise exist as to a party or person described in this Section 3.18.

12. 3.18.2 In claims against any person or entity indemnified under this Section 3.18 by an employee of the Contractor, a Subcontractor, anyone directly or indirectly employed by them or anyone for whose acts they may be liable, the indemnification obligation under Section 3.18.1 shall not be limited by a limitation on amount or type of damages, compensation or benefits payable by or for the Contractor or a Subcontractor under workers’ compensation acts, disability benefit acts or other employee benefit acts.

13. §1.1.3 The Work The term “Work” means the construction and services required by the Contract Documents, whether completed or partially completed, and includes all other labor, materials, equipment and services provided or to be provided by the Contractor to fulfill the Contractor’s obligations. The Work may constitute the whole or a part of the Project.

14. AIA – A401 – 2007 (Standard Form of Agreement Between Contractor and Subcontractor)

15. ¶4.6 Indemnification 4.6.1 To the fullest extent permitted by law, the Subcontractor shall indemnify and hold harmless the Owner, Contractor, Architect, Architect’s consultants, and agents and employees of any of them from and against claims, damages, losses and expenses, including but not limited to attorney’s fees, arising out of or resulting from performance of the Subcontractor’s Workunder this Subcontract, provided that any such claim, damage, loss or expense is attributable to bodily injury, sickness, disease or death, or to injury to or destruction of tangible property (other than the Work itself), but only to the extent caused by the negligent acts or omissions of the Subcontractor, the Subcontractor’s Sub-subcontractors, anyone directly or indirectly employed by them or anyone for whose acts they may be liable, regardless of whether or not such claim, damage, loss or expense is caused in party by a party indemnified hereunder. Such obligation shall not be construed to negate, abridge, or otherwise reduce other rights or obligations of indemnity which would otherwise exist as to a party or person described in this Section 4.6.

16. 4.6.2 In claims against any person or entity indemnified under this Section 4.6 by an employee of the Subcontractor, the Subcontractor’s Sub-subcontractors, anyone directly or indirectly employed by them or anyone for whose acts they may be liable, the indemnification obligation under Section 4.6.1 shall not be limited by a limitation on the amount or type of damages, compensation or benefits payable by or for the Subcontractor or the Subcontractor’s Sub-subcontractors under workers’ compensation acts, disability benefit acts or other employee benefit acts.

17. AGC Document No. 410 – 11.1 (Owner and Design-Builder)

18. 11.1.1 To the fullest extent permitted by law, the Design-Builder shall defend, indemnify and hold harmless the Owner, Owner’s officers, directors, members, consultants, agents and employees from all claim for bodily injury and property damage (other than to the Work itself and other property required to be insured under Paragraph 11.5 owned by or in the custody of the owner), that may arise from the performance of the Work, to the extent of the negligence attributed to such acts or omissions by the Design-Builder, Subcontractors or anyone employed directly or indirectly by any of them or by anyone for whose acts any of them may be liable. The Design-Builder shall not be required to defend, indemnify or hold harmless the Owner, owner’s officers, directors, members, consultants, agents and employees for any acts, omissions or negligence of the Owner, the Owner’s officers, directors, members, consultants, employees, agents or separate contractors.

19. 11.1.2 To the fullest extent permitted by law, the Owner shall defend, indemnify and hold harmless the Design-Builder, its officers, directors or members, Subcontractors or anyone employed directly or indirectly by any of them or anyone for whose acts any of them may be liable from all claims for bodily injury and property damage, other than property insured under Paragraph 11.5, that may arise from the performance of work by Others, to the extent of the negligence attributed to such acts or omissions by Others.

20. AGC Document No. 420 – 7.1 (Design-Builder and Architect/Engineer)

21. 7.1.1 In addition to any liability or obligation of the Architect/Engineer to the Design-Builder that may exist under any other provision of this Agreement or by law or otherwise, to the fullest extent permitted by law the Architect/Engineer shall defend, indemnify and hold harmless the Design-Builder and Owner and their respective officers, agents, employees, consultants and Subcontractors from and against claims, actions, proceedings, liabilities, losses, damages, costs and expenses, including legal fees, that may arise from the performance of the Architect/Engineer’s Services, to the extent of the negligence attributed to such acts or omissions by the Architect/ Engineer, its offers, agents, employees or subcontractors, or anyone employed directly or indirectly by any of them or by anyone for whose acts any of them may be liable.

22. 7.1.2 To the fullest permitted by law, the Design-Builder agrees to defend, indemnify and hold harmless the Architect/Engineer, its officers, agents and employees from and against claims, actions, proceedings, liabilities, losses, damages, costs and expenses, including legal fees, which the Architect/Engineer, its officers, agents and employees may sustain by reason of any negligent act or omission by the Design-Builder, its officers, agents, employees or Subcontractors arising out of the Design-Builder’s Work.

23. AGC Document No. 604 (Contractor and Subcontractor)

24. 11. Indemnity To the fullest extent permitted by law, Subcontractor shall defend, indemnify and hold harmless Contractor, Contractor’s other subcontractors, Architect/Engineer, Owner and their agents, consultants, employees and others as required by this Agreement from all claims for bodily injury and property damage that may arise from performance of Subcontract Work to the extent of the negligence attributed to such acts or   omissions by Subcontractor, Subcontractor’s subcontractors or anyone employed directly or indirectly by any of them or by anyone for whose acts any of them may be liable.

25. Sample Indemnity provisions in GC/Subcontractor contract drafted by a GC:

26. Subcontractor shall indemnify and hold harmless GC and Owner and all of their agents and employees from and against all claims, damages, losses and expenses including attorneys’ fees arising out of or resulting from the performance of Subcontractor’s work under this Subcontract, provided that any such claim, damage, loss or expense (a) is attributable to bodily injury, sickness, disease, or death, or to injury to or destruction of tangible property (other than the Work itself) including the loss of use resulting therefrom, and (b) is caused in whole or in part by any negligent act or person employed by him or anyone for whose acts he may be liable regardless of whether it is caused in part by a party indemnified hereunder. In any and all claims against GC, Owner or any of their agents or employees by any employee of Subcontractor, anyone directly or indirectly employed by him, or anyone for whose acts he may be liable, the indemnification obligation under this paragraph shall not be limited in any way by any limitation on the amount or type of damages, compensation or benefits payable by or for Subcontractor under workmen’s compensation acts, disability benefit acts or other employee benefit acts. The obligations of Subcontractor under this paragraph shall not extend to the liability of the Architect, if any, its agents or employees, arising out of (1) the preparation or approval of maps, drawings, opinions, reports, surveys, change orders, designs or specifications, or (2) the giving of or the failure to give direction by such Architect, his agents or employees provided such giving or failure to give is the primary cause of the injury or damage. This agreement for indemnification will apply reciprocally between the Contractor and Subcontractor.

27. Alternative Indemnity provision between GC and Subcontractor:

28. Subcontractor shall indemnify and hold harmless Prime Contractor, the Owner and their officers, directors, members, employees, consultants, predecessors, successors and assigns from and against all losses, suits, claims or damages for or on account of bodily injury, property damage or personal injury arising out of the performance of this Agreement by Subcontractor or any of its employees, consultants, sub-tier subcontractor or suppliers. Immediately upon notice of any such loss, suit, claim or damage, Subcontractor shall, at its sole expense and without a formal tender of defense, defend Prime Contractor, Owner, and their officers, directors, employees, consultants, predecessors, successors and assigns with counsel approved by the Prime Contractor.

29. The Additional Insured

30. Before any work is commenced by Subcontractor under this Subcontract, Subcontractor shall provide contractor with a completed certificate(s) of insurance or copies of such policies upon request evidencing that all of the required insurance coverages are in full force and effect and that Contractor and other Indemnitees have been properly named as additional insureds.

31. All of Subcontractor’s liability coverage shall be deemed primary insurance to any similar insurance Contractor may obtain for its own benefit, which shall be excess or secondary but not contributing insurance.

32. Subcontractor will indemnify Contractor against liability to third parties, including claims, damages, losses, expenses, and attorney fees that is the direct result of Subcontractor’s performance of this Subcontract Agreement to the extent that Subcontractor is at fault as agreed to in a settlement, or as determined in a court judgment or arbitration. This provision is contingent on (1) Contractor providing prompt written notice of such a claim to Subcontractor, (2) Contractor granting Subcontractor the right to participate in the defense of any such claim, (3) if Contractor wins the case, there is no liability from Subcontractor to Contractor, and (4) Subcontractor’s liability to Contractor shall be proportional to the degree to which Subcontractor’s liability to Contractor shall be proportional to the degree to which Subcontractor is at fault with Contractor.

33. Contractor will indemnify Subcontractor against liability to third parties, including claims, damages, losses, expenses and attorney fees that is the direct result of Contractor’s performance or nonperformance of this Subcontract Agreement to the extent that Contractor is at fault as agreed to in a settlement, or as determined in a court judgment or arbitration. This provision is contingent on (1) Subcontractor providing prompt written notice of such a claim to Contractor, (2) Subcontractor granting Contractor the right to participate in the defense of any such claim, (3) if Subcontractor wins the case, there is no liability from Contractor to Subcontractor, and (4) Contractor’s liability to Subcontractor shall be proportional to the degree to which Contractor is at fault with Subcontractor.

34. Indemnity and the Economic Loss Rule

35. Standards of Care for Design Professionals

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